KKR's months-long pursuit of a mega-deal in the auto parts sector has come to fruition. And like so many private equity mega-deals these days, it will involve tacking one company onto another.
Calsonic Kansei, an auto parts supplier KKR bought from Nissan Motor last year for some $4.5 billion, has agreed to purchase Magneti Marelli from Fiat Chrysler Automobiles in a move valued at €6.2 billion (about $7.1 billion). Expected to close during 1H 2019, the deal would create a combined maker of electronics, heating and cooling products, lighting and other automotive offerings with more than €15 billion in annual revenue.
In terms of total 2017 sales, Calsonic Kansei and Magneti Marelli on their own both ranked on the fringes of the top 30 among all global auto parts suppliers, per the latest rankings from Automotive News. Combined, they would vault onto the brink of the top 10. Reports that KKR was attempting to set up a merger of the two first emerged in August. At a reported 16x multiple of Magneti Marelli's earnings, the price seems to represent a hefty premium.
Through its first 10 months, 2018 has been marked by an unusual number of high-priced add-ons, led by the $21 billion combination of Dr Pepper Snapple and Keurig Green Mountain and including a host of other billion-dollar deals. In particular, firms have been eager to shell out headline-grabbing amounts of cash for add-ons of the take-private variety.
And it's not only expensive add-ons. Through the end of 3Q, add-ons of all kinds accounted for nearly two-thirds of all buyouts in the US, according to PitchBook's latest US PE Breakdown, on pace to be the highest annual figure in more than a decade.
KKR is one of the most active private equity firms in the world. But this decade, at least, the firm's add-ons have been few and far between. It's completed just 35 of them since the start of 2010, per the PitchBook Platform, accounting for barely 5% of its PE dealmaking. And the Magneti Marelli acquisition will be by far the largest: The only one of those 35 worth 10 figures was a 2016 deal that added Ascensia Diabetes Care onto Panasonic Healthcare for some €1 billion.
Current Calsonic Kansei leader Beda Bolzenius will helm the combined business, which will be known as Magneti Marelli CK. Ermanno Ferrari, the current CEO of Magneti Marelli, will join the new KKR-backed company's board of directors.
Related read: PE is spending more than ever on take-private add-ons